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Investment analysis and risk management in pharmaceutical companies

Year 2025, Volume: 55 Issue: 1, 10 - 18, 07.05.2025

Mustafa Özyeşil , Havane Tembelo

https://doi.org/10.26650/IstanbulJPharm.2025.1491350

Abstract

Background and Aims: The pharmaceutical industry, which is known for its high levels of innovation and substantial research and development efforts, is crucial for global healthcare advancement. Developing new drugs requires significant R&D investments, which involve high levels of uncertainty and high costs. This study analyzes the investment strategies and risk management practises of leading pharmaceutical companies, Pfizer and Novartis.

Methods: Financial performance indicators, investment trends, and risk mitigation techniques for Pfizer and Novartis were examined. The analysis focused on how these companies balance innovation with mitigating risks through substantial R&D investments.

Results: This study found that significant R&D investments drive revenue growth, profitability, and stock prices. Specifically, 67.7% of the variability in revenue, 70.9% of the variability in net profit margin, and 48.3% of the variability in stock price growth are attributed to R&D expenditures.

Conclusion: These findings highlight the critical role of continuous innovation and strategic investment in maintaining a competitive advantage and financial health in the pharmaceutical industry. R&D investments are essential for driving revenue growth, enhancing profitability, and boosting stock prices, underscoring the need for strategic risk management practises.

Keywords

Pharmaceutical Industry R&D Investment Financial Performance Risk Management Innovation

References

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  • Brandao, L. E., Fernandes, G., & DYer, J. S. (2018). Valuing multistage investment projects in the pharmaceutical industrY. European Journal of Operational Research, 271(2), 720-732. https://doi.org/10.1016/j.ejor.2018.05.044 google scholar
  • Chen, H., Qin, L., Jiang, C., Qin, M., Sun, Y., & Luo, J. (2023). Characteristics, risk manage-ment, and GMP standards of pharmaceutical companies in China. Frontiers in Public Health, 11, 1103555. https://doi.org/10.3389/fpubh.2023.1103555 google scholar
  • Chhabra, N., & Beera, B. R. (2017). Investment risk identification and assessment: A study of Indian pharmaceutical sector. International Journal of Banking, Risk and Insurance, 5(1), 34-43. google scholar
  • Cockburn, I. M., & Henderson, R. M. (2001). Scale and scope of drug development: Un-covering the advantages of size in pharmaceutical research. Journal of Health Economics, 20(6), 1033-1057. https://doi.org/10.1016/S0167-6296(01)00105-0 google scholar
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  • Danzon, P. M., Nicholson, S., & Pereira, N. S. (2005). Productivity in pharmaceutical-biotechnology R&D: The role of experience and alliances. Journal of Health Economics, 24(2), 317-339. https://doi.org/10.1016/j.jhealeco.2004.09.006 google scholar
  • DiMasi, J. A., Grabowski, H. G., & Hansen, R. W. (2016). Innovation in the pharmaceutical industry: New estimates of R&D costs. Journal of Health Economics, 47, 20-33. https://doi.org/10.1016/j.jhealeco.2016.01.012 google scholar
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  • Kaitin, K. I., & DiMasi, J. A. (2011). Pharmaceutical innovation in the 21st century: New challenges, new opportunities. Clinical Pharmacology & Therapeutics, 89(2), 183-188. https://doi.org/10.1038/clpt.2010.286 google scholar
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  • Liang, W., & Ge, H. (2018). Financial investment risks in the pharmaceutical industry: Analysis on fluctuation of stock price. Journal of Commercial Biotechnology, 24(3), 11-16. https://doi.org/10.5912/jcb835 google scholar
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  • Pammolli, F., Magazzini, L., & Riccaboni, M. (2011). The productivitY crisis in pharma-ceutical R&D. Nature Reviews Drug Discovery, 10(6), 428-438. https://doi.org/ 10.1038/nrd3405 google scholar
  • Paul, S. M., MYtelka, D. S., Dunwiddie, C. T., Persinger, C. C., Munos, B. H., Lindborg, S. R., & Schacht, A. L. (2010). Improving R&D productivitY: The pharmaceuti-cal industrY's grand challenge. Nature Reviews Drug Discovery, 9(3), 203-214. https://doi.org/10.1038/nrd3078 google scholar
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  • Scannell, J. W., BlanckleY, A., Boldon, H., & Warrington, B. (2012). Diagnosing the decline in pharmaceutical R&D efficiencY. Nature Reviews Drug Discovery, 11(3), 191-200. https://doi.org/10.1038/nrd3681 google scholar
  • Schuhmacher, A., Gassmann, O., & Hinder, M. (2016). Changing R&D models in research-based pharmaceutical companies. Journal of Translational Medicine, 14, 105. https://doi.org/10.1186/s12967-016-0838-4 google scholar
  • Sheela, S. C., & Karthikeyan, K. (2012). Financial performance of the pharmaceutical industry in India using DuPont analysis. European Journal of Business and Management, 4(14), 84-91. google scholar
  • Smirnov, N. V. (1948). Table for estimating the goodness-of-fit of empirical distribu-tions. The Annals of Mathematical Statistics, 19(2), 279-281. https://doi.org/10. 1214/aoms/1177730256 google scholar
  • Thakor, R. T., AnaYa, N., Zhang, Y., Vilanilam, C., Siah, K. W., Wong, C. H., & Lo, A. W. (2017). How good is the biopharmaceutical sector? Nature Biotechnology, 35(12), 1149-1157. https://doi.org/10.1038/nbt.4023 google scholar
  • Tömöri, G., Lakatos, V., & Beresne Mârtha, B. (2021). The effect of financial risk-taking on profitability in the pharmaceutical industry. Economies, 9(4), 153. https:// doi.org/10.3390/economies9040153 google scholar
  • Wiggins, R. R., & Ruefli, T. W. (2005). Schumpeter’s ghost: Is hypercompetition making the best of times shorter? Strategic Management Journal, 26(10), 887-911. https://doi.org/10.1002/smj.492 google scholar

Year 2025, Volume: 55 Issue: 1, 10 - 18, 07.05.2025

Mustafa Özyeşil , Havane Tembelo

https://doi.org/10.26650/IstanbulJPharm.2025.1491350

Abstract

References

  • Babu, C., & Kasilingam, R. (2014). An industrY analYsis of the pharmaceutical industrY for investment decision. Apeejay Journal of Management and Technology, 9(1), 16-35. google scholar
  • Brandao, L. E., Fernandes, G., & DYer, J. S. (2018). Valuing multistage investment projects in the pharmaceutical industrY. European Journal of Operational Research, 271(2), 720-732. https://doi.org/10.1016/j.ejor.2018.05.044 google scholar
  • Chen, H., Qin, L., Jiang, C., Qin, M., Sun, Y., & Luo, J. (2023). Characteristics, risk manage-ment, and GMP standards of pharmaceutical companies in China. Frontiers in Public Health, 11, 1103555. https://doi.org/10.3389/fpubh.2023.1103555 google scholar
  • Chhabra, N., & Beera, B. R. (2017). Investment risk identification and assessment: A study of Indian pharmaceutical sector. International Journal of Banking, Risk and Insurance, 5(1), 34-43. google scholar
  • Cockburn, I. M., & Henderson, R. M. (2001). Scale and scope of drug development: Un-covering the advantages of size in pharmaceutical research. Journal of Health Economics, 20(6), 1033-1057. https://doi.org/10.1016/S0167-6296(01)00105-0 google scholar
  • Cohen, J., Cohen, P., West, S. G., & Aiken, L. S. (2003). Applied multiple regression/ correlation analysis for the behavioural sciences (3rd ed.). Routledge. https:// doi.org/10.4324/9780203774441 google scholar
  • Danzon, P. M., Nicholson, S., & Pereira, N. S. (2005). Productivity in pharmaceutical-biotechnology R&D: The role of experience and alliances. Journal of Health Economics, 24(2), 317-339. https://doi.org/10.1016/j.jhealeco.2004.09.006 google scholar
  • DiMasi, J. A., Grabowski, H. G., & Hansen, R. W. (2016). Innovation in the pharmaceutical industry: New estimates of R&D costs. Journal of Health Economics, 47, 20-33. https://doi.org/10.1016/j.jhealeco.2016.01.012 google scholar
  • Field, A. (2013). Discovering statistics using IBM SPSS statistics (4th ed.). Sage. google scholar
  • Jacob, W. F., & Kwak, Y. H. (2003). In search of innovative techniques to evaluate pharmaceutical R&D projects. Technovation, 23(4), 291-296. https://doi.org/10. 1016/S0166-4972(01)00116-X google scholar
  • Kaitin, K. I., & DiMasi, J. A. (2011). Pharmaceutical innovation in the 21st century: New challenges, new opportunities. Clinical Pharmacology & Therapeutics, 89(2), 183-188. https://doi.org/10.1038/clpt.2010.286 google scholar
  • Kolmogorov, A. N. (1933). Sulla determinazione empirica di una legge di distribuzione. Giornale dell'lstituto Italiano degli Attuari, 4, 83-91. google scholar
  • Lee, M., & Choi, M. (2015). Determinants of R&D investment in the pharmaceutical industrY: A focus on financial structures. Osong Public Health and Research Perspectives, 6(5), 302-309. https://doi.org/10.1016/j.phrp.2015.10.013 google scholar
  • Liang, W., & Ge, H. (2018). Financial investment risks in the pharmaceutical industry: Analysis on fluctuation of stock price. Journal of Commercial Biotechnology, 24(3), 11-16. https://doi.org/10.5912/jcb835 google scholar
  • Munos, B. (2009). Lessons learned over 60 Years of pharmaceutical innovation. Nature Reviews Drug Discovery, 8(12), 959-968. https://doi.org/10.1038/nrd2961 google scholar
  • Pammolli, F., Magazzini, L., & Riccaboni, M. (2011). The productivitY crisis in pharma-ceutical R&D. Nature Reviews Drug Discovery, 10(6), 428-438. https://doi.org/ 10.1038/nrd3405 google scholar
  • Paul, S. M., MYtelka, D. S., Dunwiddie, C. T., Persinger, C. C., Munos, B. H., Lindborg, S. R., & Schacht, A. L. (2010). Improving R&D productivitY: The pharmaceuti-cal industrY's grand challenge. Nature Reviews Drug Discovery, 9(3), 203-214. https://doi.org/10.1038/nrd3078 google scholar
  • Rossi, C. V. (2021). A comparative investment analYsis of batch versus continuous pharmaceutical manufacturing Technologies. Journal of Pharmaceutical Inno-vation, 17(1), 1373-1391. https://doi.org/10.1007/s12247-021-09612-Y google scholar
  • Scannell, J. W., BlanckleY, A., Boldon, H., & Warrington, B. (2012). Diagnosing the decline in pharmaceutical R&D efficiencY. Nature Reviews Drug Discovery, 11(3), 191-200. https://doi.org/10.1038/nrd3681 google scholar
  • Schuhmacher, A., Gassmann, O., & Hinder, M. (2016). Changing R&D models in research-based pharmaceutical companies. Journal of Translational Medicine, 14, 105. https://doi.org/10.1186/s12967-016-0838-4 google scholar
  • Sheela, S. C., & Karthikeyan, K. (2012). Financial performance of the pharmaceutical industry in India using DuPont analysis. European Journal of Business and Management, 4(14), 84-91. google scholar
  • Smirnov, N. V. (1948). Table for estimating the goodness-of-fit of empirical distribu-tions. The Annals of Mathematical Statistics, 19(2), 279-281. https://doi.org/10. 1214/aoms/1177730256 google scholar
  • Thakor, R. T., AnaYa, N., Zhang, Y., Vilanilam, C., Siah, K. W., Wong, C. H., & Lo, A. W. (2017). How good is the biopharmaceutical sector? Nature Biotechnology, 35(12), 1149-1157. https://doi.org/10.1038/nbt.4023 google scholar
  • Tömöri, G., Lakatos, V., & Beresne Mârtha, B. (2021). The effect of financial risk-taking on profitability in the pharmaceutical industry. Economies, 9(4), 153. https:// doi.org/10.3390/economies9040153 google scholar
  • Wiggins, R. R., & Ruefli, T. W. (2005). Schumpeter’s ghost: Is hypercompetition making the best of times shorter? Strategic Management Journal, 26(10), 887-911. https://doi.org/10.1002/smj.492 google scholar
There are 25 citations in total.

Details

Primary Language English
Subjects Pharmacy Management
Journal Section Original Article
Authors

Mustafa Özyeşil 0000-0002-4442-7087

Havane Tembelo 0000-0003-3394-4166

Publication Date May 7, 2025
Submission Date May 28, 2024
Acceptance Date October 14, 2024
Published in Issue Year 2025 Volume: 55 Issue: 1

Cite

APA Özyeşil, M., & Tembelo, H. (2025). Investment analysis and risk management in pharmaceutical companies. İstanbul Journal of Pharmacy, 55(1), 10-18. https://doi.org/10.26650/IstanbulJPharm.2025.1491350
AMA Özyeşil M, Tembelo H. Investment analysis and risk management in pharmaceutical companies. iujp. May 2025;55(1):10-18. doi:10.26650/IstanbulJPharm.2025.1491350
Chicago Özyeşil, Mustafa, and Havane Tembelo. “Investment Analysis and Risk Management in Pharmaceutical Companies”. İstanbul Journal of Pharmacy 55, no. 1 (May 2025): 10-18. https://doi.org/10.26650/IstanbulJPharm.2025.1491350.
EndNote Özyeşil M, Tembelo H (May 1, 2025) Investment analysis and risk management in pharmaceutical companies. İstanbul Journal of Pharmacy 55 1 10–18.
IEEE M. Özyeşil and H. Tembelo, “Investment analysis and risk management in pharmaceutical companies”, iujp, vol. 55, no. 1, pp. 10–18, 2025, doi: 10.26650/IstanbulJPharm.2025.1491350.
ISNAD Özyeşil, Mustafa - Tembelo, Havane. “Investment Analysis and Risk Management in Pharmaceutical Companies”. İstanbul Journal of Pharmacy 55/1 (May 2025), 10-18. https://doi.org/10.26650/IstanbulJPharm.2025.1491350.
JAMA Özyeşil M, Tembelo H. Investment analysis and risk management in pharmaceutical companies. iujp. 2025;55:10–18.
MLA Özyeşil, Mustafa and Havane Tembelo. “Investment Analysis and Risk Management in Pharmaceutical Companies”. İstanbul Journal of Pharmacy, vol. 55, no. 1, 2025, pp. 10-18, doi:10.26650/IstanbulJPharm.2025.1491350.
Vancouver Özyeşil M, Tembelo H. Investment analysis and risk management in pharmaceutical companies. iujp. 2025;55(1):10-8.
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